Golsen v. Commissioner

54 T.C. 742 (1970)

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Golsen v. Commissioner

United States Tax Court
54 T.C. 742 (1970)

Facts

Jack Golsen (plaintiff) purchased a life-insurance policy designed as a tax shelter. Essentially, the policy’s terms used an intricate scheme of prepayments and borrow-backs in an attempt to have Golsen’s expenditures under the policy characterized as interest, which was tax-deductible. The Internal Revenue Service (IRS) (defendant) took the position that such policies were not entitled to the tax treatment claimed by their purchasers and had already litigated the matter in several cases. In one case, the Fifth Circuit Court of Appeals held that the purported structure of such insurance policies was valid and that holders of such policies could take advantage of the resulting tax benefits. In another case, the Tenth Circuit Court of Appeals held that the purported structure was not valid and that the IRS could reject the tax benefits sought by holders of such policies. Golsen filed his taxes as though his expenditures under his policy were deductible interest payments. The IRS issued a notice of deficiency disallowing the interest deductions, and Golsen filed a petition in the United States Tax Court. Any appeal of the Tax Court’s decision would have been heard by the Tenth Circuit Court of Appeals.

Rule of Law

Issue

Holding and Reasoning (Raum, J.)

Dissent (Withey, J.)

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